Do Whole Life Insurance Loans Have to Be Paid Back?

Suppose you owned a home, fully paid off.  If someone said to you that you could take loans on the equity and never have to pay them back, what would you say?  What if they told you that you could last through retirement by taking these loans out on a yearly basis?

Let's take a look at this.  You could take loans on the equity, but once you did, it would reduce the amount of control you had.  If you ever wanted to get access to the remaining equity, you would have to sell your home and pay off the loans.

Not wanting to do this, you might continue to take loans out year after year.  However, if an emergency situation come up, where you became ill, you might be forced to sell the home to pay back the loans and get the equity.

If you were lucky, you might actually use the equity in the home to fund the retirement.  When you passed onto a better place, your kids wouldn't get the home you worked so hard for.  Does it really make sense to say that you never had to pay back the loans?

Now, some people actually use the equity in their home to fund their retirement.  What if the mortgage company said that in order to get access to the loans, you needed to pay for a special insurance which increased in cost each year?

When looking into a life insurance contract, ask yourself the question, if I take out these loans, would my net worth decrease or would the amount of money passed onto my children decrease?  If the answer is yes, then unfortunately I would truthfully say that you must pay back the loans.

Take care in the contracts you sign.  They may drastically affect your family's future.

This post was reposted from http://finlit.biz/life-insurance/do-whole-life-insurance-loans-have-to-be-paid-back/, originally written on April 10th, 2013.